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Hedge fund VGI Partners faces the unusual prospect of being sued by Corporate Travel Management's shareholders if class action law firm Maurice Blackburn finds that an explosive report it released about the company was misleading.
Shares in Corporate Travel (CTM) dived 27 per cent on Wednesday after VGI released a 176-page report on the company which outlined 20 "red flags" it said demonstrated that CTM's shares were overvalued.
VGI had taken a short position worth about $55 million in CTM, meaning it could profit when CTM's share price fell.
Maurice Blackburn on Friday said that it was investigating whether CTM had failed to disclose some of the "red flag" issues outlined in the report earlier, with a view to launch a class action lawsuit against CTM behalf of shareholders to recoup some of the money they lost.
And, unlike in a traditional class action, Maurice Blackburn said it would also examine VGI's behaviour.
"If in fact our investigation reveals that the VGI report was misleading and contributed to the share price fall, then we may be looking to pursue a case outside the parameters of a traditional action," Maurice Blackburn principal lawyer Rebecca Gilsenan said.
“Clearly, something drastic has occurred here which has taken shareholders and the market by surprise, and an investigation into what has caused those shareholder losses is a prudent first step."
VGI's managing partner Robert Luciano said it would "create a terrible precedent" if Maurice Blackburn took its investigation any further.
"The Australian retail investor is already at a disadvantage and so do we really want to create a situation where independent research analysts in this country are afraid to say what they truly believe?” he said.
"Our analysis into Corporate Travel was based on hundreds of hours of detailed fundamental research and analysis."
Mr Luciano said VGI had not had any contact with Maurice Blackburn since 2015, when the law firm asked for its research on Slater & Gordon. Maurice Blackburn later launched a class action against Slater & Gordon.
CTM has been contacted for comment.
VGI Partners' report, published on Sunday, raised questions about its accounts, disclosure and the true scale of its business.
More to come
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